British lenders expect mortgage approval rates to fall significantly in Q3.
The Bank of England’s (BoE) quarterly credit conditions survey found that some lenders noted that changes introduced as a result of the Mortgage Market Review (MMR) might reduce approval rates.
In addition, some lenders suggested that a tightening in lending standards on large loans with high LTI ratios may also push down their approval rate.
However, the demand for secured lending for house purchase was reported to have increased significantly in Q2 and was expected to increase further in Q3.
The BoE survey found that the increase in Q2 was concentrated in an increased demand for prime lending.
The Financial Conduct Authority introduced the MMR in April, which requires home loan applicants to answer more searching questions about their personal finances before being awarded credit.
“This has meant that a majority of mortgage applications are now completed on a fully-advised basis,” Barclays chief executive officer, mortgages, Steve Weston said.
“Mortgage providers require an increased level of information and evidence from customers about their income, expenditure and also any known future changes to their circumstances; which is very similar to the regulatory requirements for lenders and mortgage brokers in Australia,” Mr Weston said.
“This has generally meant that interview times have increased and some transactions – such as rolling over one fixed rate mortgage to another fixed rate – must now be conducted on an advised basis, unless the customer chooses to make an execution-only transaction where they are able to state precisely what their requirements are without any interactive dialogue with the lender or broker,” he said.
“Most brokers were already operating on an advised basis, while some banks operated on a ‘non-advised basis’.
“It is the non-advised lenders that have had the biggest adjustment to make.”